Billions of dollars hang on Canada court's BCE hearing

By Randall Palmer

OTTAWA (Reuters) - Canada's top court has the potential on Tuesday to create several billion dollars in shareholder value for investors of BCE Inc. (BCE.TO)(BCE.N) when it considers whether to let the world's largest leveraged buyout proceed.

Rarely has the Supreme Court handled a case with such immediate and profound implications for a major publicly held company as this one, which involves a bid to take Canada's biggest telecom company private.

"The Supreme Court of Canada will be hearing arguably one of the most important corporate law cases in decades," said Aaron Dhir, who teaches corporate law at Osgoode Hall Law School in Toronto.

For now, the market has pegged the stock at only around C$33.30 a share, well below the C$42.75 per share offered by a group of investors led by Ontario Teachers' Pension Plan.

After a morning of oral hearings on Tuesday, the court could rule in favor of BCE, the parent company of Bell Canada, likely lifting the stock closer to the offer price. With almost 800 million shares, that could add about C$5 billion to the company's market value.

"I would think it would go up dramatically," UBS analyst Jeffrey Fan said, if the court ruled on BCE's side.

Bell Canada bondholders oppose the deal because it is predicated on a lot more debt being created, and this has depressed the value and rating of their bonds.

They won a surprise ruling in the Quebec Court of Appeal last month that the arrangement considered only the interests of shareholders and not of bondholders.